Economist's Insights

Today’s Trading Activity – Stocks Rally Towards Records, Yields and the Dollar Fall with Inflation Ahead of U.S. Payrolls

Aug 31, 2017

A bit of morning indecisiveness faded just before lunch and U.S. stocks joined a global rally that pushed the major indices back towards record territory. The Dow added 0.25% (170 points shy of its record) as the S&P gained 0.57% (9 points shy of its record). The Nasdaq outperformed with a 0.95% jump that notched the index a new record close. The health care sector led the S&P with nine of 11 sectors and 71% of total stocks improving on the day. The energy sector improved as crude prices rose for the first time this week. Gas prices rose 13.5%, an eighth consecutive daily gain and the sharpest in 18 months.

Treasury yields and the Dollar erased an overnight rise after the YoY PCE inflation rate fell 0.1% (as expected) to 1.4% in July. The Dollar also responded negatively to remarks from Treasury Secretary Mnuchin that a weaker greenback can benefit U.S. trade. The 2-year Treasury yield was unchanged at 1.33%. The 5-year yield dropped 1.5 bps to 1.70%, its second lowest level since mid-November. The 10-year yield fell 1.4 bps and closed at 2.12%, the lowest since the day after the election. At the bottom of their post-election range, longer yields are in a precarious technical position ahead of the August payroll data.